Carl R. Rahey v. Minister of National Revenue, [1990] 1 CTC 2272, 90 DTC 1053

Bonner, T.CJ.:—This is an application by way of interlocutory motion for judgment vacating the assessments under appeal on the ground that the delay in hearing the appeals is so great and so unreasonable that (a) the appellant's rights under paragraph 11(b) of the Charter have been violated; (b) the appellant's rights under section 7 of the Charter have been violated; (c) the Court should exercise its inherent jurisdiction to control its own process and grant relief to the appellant; and finally (d) that the appellant has been denied his right under section 1(a) of the Canadian Bill of Rights to, inter alia, enjoyment of property.

It may be useful to set forth a chronology of the main events.

(1) Assessments of tax for the appellant's 1972 to 1977 taxation years were made on March 28, 1980.

(2) In January of 1981 the Attorney General of Canada on behalf of the respondent applied to the Supreme Court of Nova Scotia for and secured the appointment of a Receiver in aid of execution against the appellant.

(3) In September of 1981 the appellant duly objected to the assessments and launched the present appeals from the assessments.

(4) In September of 1981 the respondent laid charges against the appellant under section 239 of the Income Tax Act.

(5) In November of 1981 the respondent stayed the appeals under subsection 239(4) of the Act.

(6) In May of 1987 the Supreme Court of Canada stayed the criminal proceedings against the appellant and thus terminated the effect of the stay of the appeals which had been filed under subsection 239(4).

(7) In June of 1988 the respondent served and filed a reply to the notice of appeal, a step which, I note parenthetically, he is required by subsection 6(1) of the Tax Review Board Rules to take within 60 days from the day on which the notice of appeal was transmitted to him.

(8) In March of 1989 the appellant's solicitor advised the respondent's solicitors of their intention to make this application.

One central fact in this matter is a non-event. The appellant has not shown that he has at any time subsequent to the filing of the notice of appeal made any effort to bring the appeals on for hearing on the merits.

In the affidavit filed in support of this motion, the appellant deposes, inter alia, that the Receiver had seized his books and records and that the Receiver had never provided him with access to them. Whether the appellant did or did not ask for them he does not say. Whether books and records would or would not have been of assistance to the appellant had he had access to them is also not clear. The notices of objection of June 20, 1980 speak of the need to engage professional help to assist the appellant in reconstructing, and that is the word used in the notices of objection, his finances. Thus, the books and records which did exist may not have been complete.

I will deal first with the assertion that the appellant's rights under section 11(b) of the Charter have been infringed. The assessments in issue cover tax and penalties under the provisions of subsection 163(2) of the Act. In my view, section 11 of the Charter has no application in cases of this sort. The respondent in assessing tax and penalties did not charge the appellant with an offence within the meaning of the Charter. The decisions relied on by Mr. Erlichman, that is to say The Queen v. Yes Holdings, 40 C.C.C. (3d) at page 30; and The Queen v. George's Contracting, 41 C.C.C. (3d) at page 94, are on point and although they are not, as counsel for the appellant submitted, binding on this Court in the strict sense, they are, in my respectful view, correctly decided and should be followed. Nothing said in Wigglesworth v. The Queen, [1987] 2 S.C.R. 541, supports a contrary view, that is to say a view that an assessment of a penalty under subsection 163(2) of the Income Tax Act involves a prosecution of an offence in a civil or criminal proceeding. In this regard reference should be made to the reasons of Wilson, J. at pages 559 and 560. The decision of the Federal Court of Appeal in Amway Corporation v. The Queen, [1987] 1 C.T.C. 97, involved a statutory scheme which is quite different from the scheme under the Income Tax Act. That scheme provided for the recovery of a penalty by civil proceeding in the Federal Court. There is a fundamental difference between it and the unilateral administrative act of assessment coupled with the grant of a right of appeal to this Court or to the Federal Court as contemplated by the Income Tax Act.

It is convenient at this point to deal with submissions made by counsel for the appellant to the effect that an income tax appeal is in essence a proceeding in which the Minister must establish that the assessment is correct. It was on that premise that counsel advanced complaints about the Minister's failure to proceed promptly with the appeal and shrugged off questions as to the total absence of proof that the appellant made any effort whatsoever to get the case moving. The nature of an assessment and the process of appeal therefrom is described in and clear from passages to which I will refer from three cases. First, there are the reasons of Thorson, P. in Provincial Paper v. M.N.R., [1954] C.T.C. 367; 54 D.T.C. 1199 at 1201. There, Thorson, P. referred to an earlier decision and said:

Then, at page 500 [C.T.C. at p. 198], I defined assessment as follows:

The assessment, as I see it, is the summation of all the factors representing tax liability, ascertained in a variety of ways, and the fixation of the total after all the necessary computations have been made.

In Dezura v. M.N.R., [1948] Ex. C.R. 10 at 15; [1947] C.T.C. 375 at 380, I said:

The object of an assessment is the ascertainment of the amount of the taxpayer's taxable income and the fixation of his liability in accordance with the provisions of the Act.

And in Morch v. M.N.R., [1949] Ex. C.R. 327 at 335; [1949] C.T.C. 250 at 258, I described the assessment as “an important administrative act within the exclusive function of the Minister.”

Next I refer to passages from the decision of the Supreme Court of Canada in Johnston v. M.N.R., [1948] S.C.R. 486; [1948] C.T.C. 195; 3 D.T.C. 1182, at page 203 (D.T.C. 1183-84):

I am consequently unable to accede to the view that the proceeding takes on a basic change where pleadings are directed. The allegations necessary to the appeal depend upon the construction of the statute and its application to the facts and the pleadings are to facilitate the determination of the issues. It must, of course, be assumed that the Crown, as is its duty, has fully disclosed to the taxpayer the precise findings of facts and rulings of law which have given rise to the controversy. But unless the Crown is to be placed in the position of a plaintiff or appellant, I cannot see how pleadings shift the burden from what it would be without them. Since the taxpayer in this case must establish something, it seems to me that that something is the existence of facts or law showing an error in relation to the taxation imposed on him.

What was said in those earlier cases must, of course, be read in so far as penalties are concerned as modified by the subsequent enactment of subsection 163(3) of the Income Tax Act. One decision subsequent to the addition of 163(3) is The Queen v. Wellington Taylor, [1984] C.T.C. 436; 84 D.T.C. 6459, at 439 (D.T.C. 6461) following. There Mr. Justice Rouleau of the Federal Court- Trial Division said:

As I have stated, the assessment shall remain valid until it is found to be erroneous by the Court. This principle is enunciated in Morch v. M.N.R., [1949] Ex CR 327. On an appeal, the burden is on the taxpayer to overturn the assessment. It is deemed valid because of subsection 152(8) of the Act; it is the taxpayer's appeal and he must therefore show that the impeached assessment is an assessment which ought not to have been made; and it follows that the facts, almost to exclusivity, are within the taxpayer's knowledge. This basic principle dates back to 1925 as was clearly set out in the case of Anderson Logging v. The King, [1925] SCR 45 at 50 which states as follows:

First, as to the contention of the point of onus. If, on an appeal to the judge of the Court of Revision, it appears that, on the true facts, the application of the pertinent enactment is doubtful, it would, on principle, seem that the Crown must fail. That seems to be necessarily involved in the principle according to which statutes imposing a burden upon the subject have, by inveterate practice, been interpreted and administered. But, as concerns the inquiry into the facts, the appellant is in the same position as any other appellant. He must show that the impeached assessment is an assessment which ought not to have been made; that is to say, he must establish facts upon which it can be affirmatively asserted that the assessment was not authorized by the taxing statute, or which bring the matter into such a state of doubt that, on the principles alluded to, the liability of the appellant must be negatived. The true facts may be established, of course, by direct evidence or by probable inference. The appellant may adduce facts constituting a prima facie case which remains unanswered; but in considering whether this has been done it is important not to forget, if it be so, that the facts are, in a special degree if not exclusively, within the appellant’s cognizance; although this last is a consideration which, for obvious reasons, must not be pressed too far.

At page 440-41 (D.T.C. 6463), Mr. Justice Rouleau added:

I do not accept that a finding against the Minister under subsection 163(2), or more particularly under the onus subsection 163(3), could have been intended by Parliament to eliminate the duty imposed on a taxpayer under section 152. Subsection 152(8) is quite clear and precise, ”. . . subject to being varied or vacated on an objection or appeal to this Part . . .” A finding under subsection 163(3) is not a finding under "this Part”, subsection 152(8).

Thus it is plain that it is not open to the appellant to complain about the Minister's failure to push the appeal on for hearing. He had carriage of the appeal and still does. Rather, the appellant must shoulder the consequences of his own failure to proceed with his appeal.

That said, however, it is necessary to address the fact that much of the delay was caused by the exercise of the Minister of his power under subsection 239(4) of the Act to stay the appeal. In my view, it was never in the contemplation of the legislature that the liability for tax imposed by section 2 of the Income Tax Act and ascertained or fixed in amount by assessment under section 152 of the Act should in some mysterious way vanish because, and only because, time passes due to the filing of a stay of proceedings in an appeal from an assessment.

It is not suggested that the assessment was not made in a timely manner. The validity of assessments duly made does not diminish with the passage of time. The ability of an appellant to discharge the burden which rests on him may well be adversely affected by the passage of time. I am acutely conscious of the difficulties that it may create for the appellant in this case. But, of course, the judge who eventually hears the appeal will in weighing the evidence tendered be aware of the problems caused by the delays.

In any event, in light of the foregoing I cannot accede to the appellant's request to vacate the assessments for delay on common law principles.

The cases cited in paragraph 34 of the factum filed on behalf of the appellant relate to the dismissal of a plaintiff's case for want of prosecution. The position of the Minister is, on the basis of the authorities to which I have already referred, is in no way analogous to that of a plaintiff in an ordinary civil case for the reasons I have stated.

I turn next to the question of section 7 of the Charter. The short answer to the submissions made under this head is that:

(a) Section 7 of the Charter does not protect property rights.

(b) Even if that were not so the vexation and other ill effects said to have been caused by the receivership flow from proceedings taken in another Court. If such proceedings are to be attacked, that attack must be made elsewhere. This Court obviously has no jurisdiction over proceedings in the Supreme Court of Nova Scotia or over actions taken by persons in their capacity as officers of that Court.

Furthermore, no frailty in proceedings taken to collect the tax (if any such frailty exists) can justify vacating the assessment of tax itself. The foregoing provides a complete answer as well to arguments founded on section 1(a) of the Canadian Bill of Rights.

For the foregoing reasons the application will be dismissed.

I might add that the time between May of 1987 and the present would have been much better spent in preparing for trial and getting on to trial than in doing whatever culminated in this motion. I suggest that every effort ought to be made now to prepare for trial. I have heard some rather long period suggested as being necessary for the trial of this action. At the moment I can tell you that there are three days that are open if you want to get going. February 7, 8, and 9 are presently available and I can fix it right now for hearing on those days. If those wouldn't be enough, the answer in that case is to make a realistic appraisal of the length of time required and reach agreement and make a joint application for a hearing date. I do not think it will be that difficult to get.

The order will go accordingly dismissing the motion. Thank you.

Application dismissed.